The Skewing of America: Disparities in Wealth and Income
by Ronald D. Pasquariello
Mr. Pasquariello is senior fellow at the Center for Theology and Public Policy in Washington, D.C. This article appeared in the Christian Century, February 18, 1987, p. 164. Copyright by the Christian Century Foundation and used by permission. Current articles and subscription information can be found at www.christiancentury.org. This material was prepared for Religion Online by Ted & Winnie Brock.
The Federal Reserve Board reported some staggering news last summer: one-half of 1 per cent of American families (just 419,590 out of a total of about 87 million households) possess 35 per cent of this country’s privately held wealth. As it turns out, the board had to rescind its study because a major error had been made. The new results are not yet available; they will not be as drastic, though they will show that the gap between the rich and the rest of us -- stable until recently -- has widened. Private wealth is the value of an individual’s or household’s possessions. It includes real estate, homes, cars, stocks, trusts, savings and retirement accounts. Wealth is not income. Wealth is capital, stored-up economic power; it tends to be stable, and to grow. It is the cushion against the shocks of a mercurial economy. Income, on the other hand, is constituted primarily by wages and salaries (it also includes interest and dividends) , and offers only as much economic stability as the job market does -- which is very little.
The wealth concentrated in the hands of the very rich includes assets that confer economic power. In 1972, the top 5 per cent of the population held 66.7 per cent of the corporate stock and 93.6 per cent of state and local bonds. This disparity, which has since widened, suggests that the very rich can control the decisions related to corporate and municipal assets. The net worth of most Americans does not amount to much. Most families’ forms of wealth are limited to homes, automobiles, furnishings, appliances and checking and savings accounts. For most, the family residence is the principal form of wealth. Except for money that may be raised by second mortgages, residences are not an available asset for most families. Furthermore, the value of a residence is subject to the capriciousness of the housing market. The fragile economic situation of most Americans has been starkly evident in communities where plants have closed or moved away. Many homeowners have been left job-less, with houses that are unsalable. As for savings, the average American has at most $5,000 -- hardly enough to support a family after unemployment benefits run out.
Within the past decade, the median family income has leveled off and begun to decline. In 1979, 50 per cent of two-parent families had an income of $26,299. Today 50 per cent earn $24,556 or less. (There is a similar decrease for single-parent families.) The distribution of income among families has also become more unequal in recent years. The share of total income going to the bottom 60 per cent of American families has declined, and the share going to the next 20 per cent has increased negligibly, while the share going to the top 20 per cent has increased by 2.5 per cent.
The major reason for the decline in family income is the decline in real wages: most incomes are from wages. and average earnings have declined since peaking in 1973. Weekly wages have declined by 14.5 per cent, hourly wages by 10.1 per cent. Behind this decline is the loss of middle-income jobs as a result of the rise of the service economy and the failure of the minimum wage to keep pace with inflation.
According to statistics supplied by the Economic Policy Institute, a 25-year-old male worker in 1953 or 1963 could expect to more than double his income over a period of ten years. But in 1973, a 25-year-old male could expect a mere 16 per cent increase in income by 1983. The average male who was 40 in 1973 actually saw a 14 per cent decline in his income over ten years.
Practically all the households with annual incomes of more than $25,000 in 1983 were those of working couples. The traditional middle-class family with one wage-earner is no longer as economically feasible as it once was. Even in two-earner families incomes can stagnate, for women’s wages still remain low relative to men’s (so a woman’s salary does not necessarily double the family income)
All of these figures indicate why there has been a decline in the proportional size of the middle class. Between 1973 and 1985, the proportion of American families with incomes between $20,000 and $50,000 dropped 5 percent. The sector of families earning less than $20,000 grew 3.4 per cent. The number with incomes greater than $50,000 grew, but by only 1.8 per cent. Meanwhile, poverty has been increasing among low-income persons. In 1978 about 24.5 million Americans lived below the poverty line, but by 1984 the number had climbed to 33.7 million. Moreover, the number of persons who work but are still unable to escape poverty has grown dramatically in recent years. The number of those aged 22 to 64 who work but are still poor has increased by more than 60 per cent since 1978, according to the Center on Budget and Policy Priorities.
Are there any specific forces responsible for this situation? For instance, what is the role of the current administration; is it to blame? The Wall Street Journal put it this way: "The Reagan administration’s policies haven’t narrowed the gap between rich and poor. The tax cuts in the first five years of Mr. Reagan’s presidency favored the wealthy: reducing capital gains taxes benefited those with capital. Government programs aimed exclusively at the poor were trimmed, but others that help a broader group -- Social Security and veterans benefits, for instance -- weren’t" (September 22, 1986).
Though the skewing of America began before President Reagan took office, his policies have markedly accelerated the process. The Congressional Budget Office has indicated that budget and tax changes enacted from 1981 to 1983 have taken $20 billion from those with incomes below $20,000 a year and brought about a $35 billion increase for households with incomes of $80,000 or more.
Why should these facts concern Christians? First of all, because concentrations of wealth have important economic consequences. As was pointed out above, wealth translates into economic power and control through corporate stock and nonincorporated businesses, real estate and state and local bonds. Those who control these assets control how they are used and developed. The investment decisions of private companies, for example -- decisions that affect how and where people work and what and how much they produce -- are made in offices far removed from those workers or the general public. Those with wealth, who are closely tied to the banking community, govern capital accumulation and, with it, decisions about employment technology, income distribution, work organization, consumption patterns, and even our relations with other nations.
Consider the development of Harbor Place, a renovated waterfront area in Washington, D.C. All the decisions about how it should be built, what kind of establishment it should be, and to whom the site should cater were made almost entirely by the developers. Local residents who are worried about the effect on parking that the new 1,000-seat restaurant will cause were not consulted. In too many cases, decisions about which plants should be developed, which should be allowed to deteriorate, and which should be moved in pursuit of lower wages are made by corporate stockholders and their managers. Whole cities have been held hostage to large businesses, which threaten to withdraw if their demands are not met.
The concentration of wealth puts control of the not-really-free market in the hands of a relatively few families. Decisions about the quality of the food we eat, the goods we buy, the air we breathe, the prices we pay, the way work is divided and jobs defined, the kinds of transportation, recreation and entertainment available, the opinions and values that are supposed to be important, the kind of treatment we get in schools, clinics and hospitals -- these are made by the people who control the economic resources.
The second reason for Christians to be concerned is that economic control also means political control. Thomas Jefferson feared that "an aristocracy of wealth [is] of more harm and danger than benefit to society." Those who control economic resources have the potential to control legislative decisions. Government is beholden to those who control the purse strings, and not only because of the dollars needed to run political campaigns. One of the functions of government is to ensure the stable operation of the economy, and to do so it must often defer to the wishes of those who control the means of production. A government that limited or disrupted economic growth, risking thereby the displeasure of the economic overlords, would also be putting the coherence of its polity at risk.
Finally, the concentration of wealth should be a concern because it is a cause of poverty. There is a tendency for Americans who think about the problem at all to consider poverty a problem of individuals. Individuals are poor because they lack certain social skills, or they lack intelligence or virtue, or they are inadequately educated, or have incongruous cultural values or have too many children. From this perspective, the solution to poverty is simply to let poor people feel the spur of their poverty, which should motivate them to alter their behavior. Usually those who urge the motivational value of privation are not themselves poor. When they get hungry, they go to the nearest restaurant. Nothing is more ludicrous than such criticism of the ill fed, ill housed and ill clothed by the well fed, well housed and well clothed.
Poverty ought to be viewed instead as an aspect of inequality, a facet of the maldistribution of wealth and income. It is the inevitable social byproduct of the concentration of wealth in the hands of a few. From this perspective, one does not pay primary attention to individuals, or propose programs aimed at correcting the deficiencies of individuals. For if inequality is the cause of poverty, the proper question is not "What is it about individuals that makes them poor?" but "What is it about the nature of the economy that creates poverty?"
The case can be made that the current economic situation derives from our particular brand of American individualism. Individualism is healthy if it means the freedom to choose moral, political and cultural alternatives within a community of mutual concern. However, individualism has come to mean a solipsistic, acquisitive consumerism. Americans try to get what they can for themselves, by themselves, without being too troubled by the needs and problems of others. One works for oneself and leaves the rest of society to the workings of the "invisible hand." Indeed, according to this ideology it is by working for one’s own advancement, without regard for other individuals or for the polity, that one does the greatest good for society.
What is lacking here is a true sense of the common good. Were programs and policies shaped by the obligation to contribute actively to the common good, the situation would be altered. Social responsibility, in this context, means being aware of and concerned about the impact of one’s actions on others. If people saw themselves obligated to ensure that everyone has the essentials of life’s opportunities, then the economic and political institutions of society would be structured differently.
Gross inequality is a direct contradiction of the will of God, the creator and sovereign over all nations and peoples. Creation is God’s gift to all. We are collaborators in creation, our task being to shape the social and economic order according to God’s intentions. To allow the appropriation of the world’s resources by a small minority of persons betrays the gift of creation and the giver of the gift.
The prophets railed against the accumulation of land, and Israel’s law provided for the Year of Jubilee, when land was returned to its original owners. The covenant established a community of mutual responsibility and care. Jesus, in keeping with this tradition, had a special concern for the poor, and opposed the accumulation of possessions. He disdained the type of economic inequality which we are now witnessing. "A man’s life does not consist in the abundance of his possessions," he declared (Luke 12:15) , and he called the rich man who builds larger and larger barns in which to store his grain and other goods a fool, cautioning his listeners that "he who lays up treasure for himself . . . is not rich toward God" (12:16-21) As biblical scholar Richard J. Cassidy points out in Jesus, Politics and Society (Orbis, 1978) , that parable focuses on those who already have enough for their needs. The landowner does not seem to have acquired his wealth unfairly or dishonestly; nevertheless, because he held on to more possessions than he needed, because he possessed wealth without regard to the covenant community, he was declared a fool in the sight of God.
In the Bible, Walter Brueggemann says, justice means "to sort out what belongs to whom, and return it to them" ("Voices of the Night -- Against Justice," To Act Justly, Love Tenderly, Walk Humbly [Paulist, 1986], p. 5). There is a right distribution of goods and of access to the source of life. People have entitlements which must be respected. All this is implied in the great biblical vision of covenant and shalom, in which every family, clan, tribe and person has a place in which their God-given dignity is respected. This vision is not a romantic ideal; it calls for the transformation of unjust social systems. It is the obligation of churches to bring this biblical vision to bear on our complex economic and social world. They attempt this at some risk, of course, for it is not an easy message, and too many of the churches and those in the churches are dependent on the holders of wealth for their own economic wellbeing. But if the problem is not addressed by the ambassadors of the gospel, who will do so?